Listen very closely… do you hear it? That hissing you hear is the sound of air escaping from The Great Web 2.0 Scam. The signs are accumulating that the faux-economy of venture capital and Google ads that underpin an infinite number of worthless internet startups may finally have run its course: last Friday, Google “The Mother of All Bubbles” closed at $600.25 — down 20% from it’s intra-day high of $747.24 set last November 6 and far outpacing the 13% decline in the S&P 500 over the same period. And that may not be the worst — last week, the [dour pronouncements] of a media macher about declining prices for online advertising combined with numbers from Nielsen showing a [decline in search market share] for Google suggest that when Google presents their 4Q earnings on January 31 there could be some very sober faces standing around the foosball tables of Silicon Valley.
But when the history of this strange period is written I have a feeling that the peak of “irrational exuberance” in this bizarre bubble may well be seen to have occurred last week when [Business Week], [TechCrunch] and others published news that a company called Slide, founded by the guy who created PayPal, was valued at 500 million dollars. Slide, in case you aren’t familiar, is an online application that allows people to upload photos into a customized “slideshow” and then share their work of art (which, from looking at their site, consists mostly of slideshows of half-naked babes). That’s it. In a normal world this thing would be called a blog plug-in and people would say, “Oh, cool… stupid” and move on. To put this valuation in some perspective, it took Microsoft 10 years to reach a valuation of $500 million and that was just after they went public in 1986. Their operating systems were already on hundreds of millions of computers, Windows had just been released, they were about to release Excel, the cornerstone of their Office suite and they were generating about $200 million a year in revenue. That was what a half-billion dollar company looked like, then. Twenty years later, this is what one looks like: